1994 (5) TMI 124 - AT - Central Excise

Issues Involved:
1. Interpretation of Rule 57C of the Central Excise Rules.
2. Eligibility for Modvat Credit on inputs used in the manufacture of goods cleared without payment of duty under Rule 191BB.
3. Applicability of Notification 33/90-C.E. (N.T.), dated 5-9-1990.
4. Clarifications issued by the Central Board of Excise and Customs.
5. Relevance of past judgments and circulars.
6. The effect of Trade Notices on the issue.
7. Applicability of Rule 57F(3) and Rule 57-I.
8. Impact of Section 11B(2) of the Central Excises and Salt Act, 1944.

Summary:

1. Interpretation of Rule 57C:
The primary issue revolves around the interpretation of Rule 57C of the Central Excise Rules. The appellant argued that Rule 57C does not apply to removals under Rule 191BB, as these are not exempt from duty but cleared without payment of duty under a bond. The Tribunal agreed, citing the Delhi High Court's judgment in Hindustan Aluminium Corporation Limited v. Collector of Central Excise, which distinguished between exemption from duty and clearance without payment of duty.

2. Eligibility for Modvat Credit:
The appellant contended that they should be allowed Modvat Credit on inputs used in the manufacture of Man-made Staple Fibre (MMSF) cleared without payment of duty under Rule 191BB. The Tribunal upheld this view, stating that such clearances are distinct from exemptions and do not fall under the purview of Rule 57C.

3. Applicability of Notification 33/90-C.E. (N.T.), dated 5-9-1990:
The appellant argued that Notification 33/90 allows clearance without payment of duty for goods supplied to manufacturers of final products for export, which is different from an exemption notification. The Tribunal agreed that Notification 33/90 is not an exemption notification and thus Rule 57C does not apply.

4. Clarifications by Central Board of Excise and Customs:
The appellant referred to clarifications issued by the Central Board of Excise and Customs, which stated that exports under bond are not exempt from duty and thus not covered by Rule 57C. The Tribunal found these clarifications relevant and applicable to the present case.

5. Past Judgments and Circulars:
The Tribunal considered past judgments, such as the Delhi High Court's decision and Circular No. 10/75-CX 6, which supported the appellant's view that clearances under bond are not exemptions from duty. These judgments and circulars were deemed applicable to the current case.

6. Effect of Trade Notices:
The Tribunal found the Trade Notice dated 9-7-1992, which the Collector relied upon, to be vague and lacking legal basis. It was concluded that the Trade Notice did not affect the appellant's eligibility for Modvat Credit.

7. Applicability of Rule 57F(3) and Rule 57-I:
The appellant argued that Rule 57F(3) allows the utilization of credit for any final products intended to be manufactured using the inputs, regardless of actual use. The Tribunal did not pronounce on this argument but noted that Rule 57C does not apply in this case. The appellant also argued that Rule 57-I was inapplicable as there was no error or wilful misstatement in taking the credit.

8. Impact of Section 11B(2):
The Tribunal rejected the Collector's argument on unjust enrichment under Section 11B(2), stating that recrediting the amount does not amount to a refund of duty and is not hit by Section 11B(2).

Conclusion:
The Tribunal allowed the appeal, setting aside the Collector's order and directing the recrediting of the disallowed amount. The decision emphasized the need for the Central Board of Excise and Customs to address ambiguities in Rule 57C and related provisions to avoid future controversies.

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